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CHAPTER- JOINT VENTURE ACCOUNTING

1. When two or more persons join together for a specific business, it is called Joint Venture. It is a case of a
partnership (without firm name) coming into existence for limited purpose.

2. It is temporary and no liability attached to any party after the transaction or the particular series of transaction
is complete. The partners in this case are called "Co-venturers'.

3. Maintenance of Accounts: There are three methods of maintaining account with respect to joint Venture
Transactions:

(a) when Separate Set of Books are maintained:-- Main accounts prepared under the method are:
(i) Joint Bank account: it’s a personal account.
(ii) Joint Venture Account: it’s a nominal account. It shows profit or loss on joint venture.
(iii) Personal Account of co-venturers (showing investment, entitlements, receipts drawing by co-ventures)

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Practice Question:1 COC and TATA entered into a Joint venture to buy and sell commodity ‘X’ into the market.
They opened a Joint Bank and deposited Rs. 8,00,000 in their profit sharing ratio, which was equal.

They purchased goods worth Rs. 5,00,000 and paid Rs. 60,000 as salary to staffs and Rs. 40,000 as advertisement
expense. They also purchased machine for Rs 1,00,000. COC also supplied materials worth Rs. 20,000. TATA paid
Rs. 30,000 as rent from his personal account.
Sales were made for Rs. 10,00,000 and unused goods worth Rs. 40,000 was taken over for Rs. 12,000 by TATA.
At the end of Joint Venture machine was sold for Rs. 60,000. Prepare necessary accounts.
Solution: Joint venture account

Particulars Amount Particulars Amount

To Joint Bank account: By Joint bank account 10,00,000
Material 5,00,000 (sales)
Salary 60,000
Advertisement 40,000 6,00,000 By TATA account 12,000
(material)
To Joint Bank account: (Machine) 1,00,000
By Joint Bank account
To COC account (material) 20,000 (machine sold) 60,000
To TATA account (Rent) 30,000

To profit on joint venture: 3,22,000

COC – 1,61,000
TATA - 1,61,000

10,72,000 10,72,000

Joint bank account

Particulars Amount Particulars Amount

To COC 4,00,000 By Joint venture 6,00,000
To TATA 4,00,000 By Joint venture 1,00,000
To Joint venture 10,00,000 By COC account 5,81,000
To Joint venture 60,000 By TATA account 5,79,000
18,60,000 18,60,000
Co- venturer account

Particulars COC TATA Particulars COC TATA

To Joint venture 12,000 By Joint Bank 4,00,000 4,00,000
By Joint venture 20,000 30,000
By Joint venture 1,61,000 1,61,000
To Joint Bank ( bal fig) 5,81,000 5,79,000

5,81,000 5,91,000 5,81,000 5,91,000

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(b) When Separate Set of Books are not maintained:

• Under this approach each Co-venturer maintains joint venture A/c and Personal A/c of the other co-venturer.
• In this method, no separate joint bank is opened.
• This method is generally followed when volume of transactions are very less.

Format of joint venture account in the book of A (Other party B)

Particulars Amount Particulars Amount

To bank account: By bank account: - xxxx
(Expenses incurred by A) xxxx (Sales made by A)

To purchase / goods: - By purchase / goods: - xxxx

xxxx
(Material supplied by A) (Material withdrawn by A)

To B account: - By B account: -
xxxx
(Expenses incurred/ material xxxx (Material withdrawn by B/ sales
supplied by B) made by B)

To profit on joint venture: -

Profit & loss account (share of A)
xxxx
To B’s account (Share of B) xxxx
xxxx xxxx

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Practice question 2. Ram and Mohan entered into joint venture to buy and sell new year gifts. Ram purchased
goods costing ₹4,00,000 and paid freight of ₹24,000. He sent 70% of the goods to Mohan to be sold for mutual
benefit. Mohan received the goods and incurred ₹20,000 on rent, ₹14,000 on advertisement. Ram and Mohan
made sales of ₹3,00,000 and ₹4,80,000 respectively. Unused goods costing ₹16,000 were withdrawn by Mohan
at an agreed value of ₹19,000. Earlier Ram had received an advance of ₹1,00,000 from Mohan on account of
Joint venture. Prepare necessary accounts in the book of Ram.
Answer: In the book of Ram
Joint venture account

Particulars Amount (₹) Particulars Amount (₹)

To Bank account: By bank account :(sales) 3,00,000
Material 4,00,000 4,24,000
By Mohan account: (sales)
Freight 24,000
4,80,000

To Mohan account:
34,000
Rent 20,000 By Mohan account:
Advertisement 14,000 (material withdrawn) 19,000

To profit on joint venture:

Profit & loss account 1,70,500
3,41,000
To Mohan’s account 1,70,500
7,99,000 7,99,000
Mohan account
Particulars Amount (₹) Particulars Amount (₹)
By Joint venture 34,000
To Joint venture 4,80,000
By Joint venture 1,70,500
To joint venture 19,000
By bank account (Advance) 1,00,000

By ( bal. fig) 1,94,500

4,99,000 4,99,000

Important note 1: No entry is made for transferring goods from one co-venturer to other co-venturer.

Note 2. Journal entry for asset supplied by Ram:

Joint venture account Dr

To Machine account

Note 3. Journal entry for asset supplied by Mohan:

Joint venture account Dr

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To Mohan account

Practice question 3. Manjit and Ranjit entered into Joint Venture agreement to share the profits and Losses in the
ratio of 2: 1. Manjit supplied goods worth ₹60,000 to Ranjit incurring expenses amounting to ₹2,000 for freight
and insurance. During transit Goods costing ₹5,000 became damaged and a sum of ₹3,000 was recovered from
the Insurance Company. Ranjit reported that 90% of the remaining goods were sold at a profit of 30 % on their
original cost.

Towards the end of the venture, a fire occurred and as a result the balance stock lying unsold with Ranjit was
damaged. The goods were not insured and Ranjit agreed to compensate 80% of the aggregate of the original
cost of such goods and proportionate expenses incurred. A part from joint venture share of profits, Ranjit was
also entitled under the agreement to a commission of 5% of net profits of joint venture after charging such
commission. Selling expenses incurred by Ranjit totaled ₹1,000.
Ranjit had earlier remitted to an advance of ₹10,000, Ranjit duly paid the balance due to Manjit by draft.
PREPARE in Manjit's books, (i) Joint Venture A/c (ii) Ranjit's A/c.

Solution: In the book of Manjit:

Joint venture account
Particulars Amount (₹) Particulars Amount (₹)
To goods/ purchase account 60,000 By bank account :(insurance claim) 3,000

To Bank account: 2,000 By Ranjit account :(sales) 64,350

(Freight and insurance)
By Ranjit account: (compensation) 4,547
To Ranjit account: (commission) 424
To Ranjit account: (selling expense)
To profit on joint venture:- 1,000
To Profit & loss account 5,649
To Ranjit’s account 2,824
8,473
71,897 71,897

Ranjit account
Particulars Amount (₹) Particulars Amount (₹)
By Bank account (advance) 10,000
To Joint venture 64,350
By Joint venture 424
To joint venture 4,547
By Joint venture 1,000
By Joint venture 2,824
By bank account (bal. fig) 54,649
68,897 68,897

Working notes: -
(1) Computation of commission to Ranjit:-
Profit before commission = ₹8,897

𝟓
Commission = 8,897 X 𝟏𝟎𝟓 = ₹424
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(C) Memorandum joint venture Method:

Under this method joint ventures accounts are prepared on memorandum basis in the books of each co-venturer
just to find out the profit or loss but not as part of ledger.

Each co- venturer prepares following accounts.

(a) Memorandum Joint Venture Account: it is a nominal account. It is prepared to calculate profit or loss
during the year. Entries in Memorandum Joint Venture Account are not made through journal entries.

(b) Joint Venture with other Co-venturer A/c (i.e., Personal Account of other co-venturer)

Practice question 4. Avinash and Srikant entered into joint venture to construct a building for COC Pvt ltd for
the contract price of ₹12,00,000 payable in cash. Avinash purchased material costing ₹6,00,000 and paid freight
of ₹20,000. He had also supplied machine worth ₹2,00,000 to the joint venture. Srikant also paid ₹60,000 as
rent and ₹20,000 as advertisement. Avinash drew upon Srikant a bill for ₹2,50,000 which was duly accepted by
Srikant. The bill was discounted with bank for ₹2,42,000.

Goods costing ₹15,000 lost in transit against which insurance company paid ₹8,000 to Avinash in full settlement.
Some of goods were lost due to Avinash negligence for which he agreed to compensate joint venture a sum of
₹28,000. At the end of joint venture machine was taken by Avinash at an agreed value of ₹1,30,000. Prepare
necessary accounts in the book of both the parties assuming that profit sharing ratio was 3:2 and contract price
was received by Avinash.

Solution: In the book of Avinash

Joint venture with Shrikant account

Particulars Amount (₹) Particulars Amount (₹)
To bank account 6,20,000 By Bills receivable account 2,50,000
To machine account 2,00,000 By bank account (claim) 8,000
To discount account 8,000 By profit & loss account 28,000
To profit & loss account 2,74,800 By machine account 1,30,000
To bank account 5,13,200 By bank account (sale) 12,00,000
16,16,000 16,16,000

In the book of Srikant

Joint venture with Avinash account
Particulars Amount (₹) Particulars Amount
(₹)
To bank account 80,000 By bank account (bal fig) 5,13,200
To bills payable account 2,50,000
To profit & loss account 1,83,200
5,13,200 5,13,200

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Memorandum joint venture account

Particulars Amount (₹) Particulars Amount (₹)

To Avinash account: - By Avinash account: -
Expenses 6,20,000 Claim 8,000
Machine 2,00,000 Compensation 28,000
Discount 8,000 8,28,000 Machine 1,30,000
13,66,000
Sale 12,00,000
To Srikant account: (Expenses) 80,000
By Srikant account: nil
To Profit on joint venture:
Avinash 2,74,800 4,58,000
Srikant 1,83,200
13,66,000 13,66,000

Practice question 5. (Conversion of JV into Consignment): A and B enter into a joint venture and agreed
to share profits and losses equally. It is also agreed between them that A should make purchases for the
joint venture at Ahmedabad, where he resides and consign the same to B at Mumbai. Accordingly, A
purchased goods worth ₹62,000 and sent them to Mumbai and in so doing he had to pay ₹1,300 for
insurance and ₹3,700 for carriage, freight and other expenses.

B reported after some time that he had sold some goods for ₹60,000 and the remaining goods could not be
sold on account of bad market conditions. A and B then handed over the unsold goods to local merchant, C,
at Mumbai, who agreed to sale the goods on their behalf. C was to be paid all the expenses in that connection
and was to be allowed a commission at the rate of 2.5 % on the sale price of the goods sold.

C, after some time, sent to B a cheque for ₹4,500 after deducting expenses ₹375 and commission. The sale
price of goods sold by C was ₹5,000. C returned the unsold goods to B. A and B then decided to close the joint
venture, B taking up the balance of the goods unsold which had cost ₹25,000 at a discount of 8%. B sent a
statement of account to A showing the following payments made by him: Carriage. ₹1,600; Office expenses
₹2,800; Insurance ₹2,500, Office and Godown rent ₹1,500; Brokerage, ₹3,600. He also sent a cheque for
₹70,000 to A.
You are required to prepare the necessary accounts in A's ledger showing his share of profit or loss on the
joint venture and the amount due to or by B.

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Solution: - In the book of A Joint venture account

Particulars Amount (₹) Particulars Amount (₹)

To Bank account: By B’s account(sale) 60,000
Material 62,000
Insurance 1,300 By C’s account :(sales) 5,000
Carriage 3,700 67,000
By B account: (withdrawn) 23,000
(₹25,000 – 8% of ₹25000)
To C’s account:
Expenses 375
Commission 125 500

To B’s account:
Carriage 1,600
Office expense 2,800
Insurance 2,500
Rent 1,500
Brokerage 3,600 12,000

To profit on joint venture: -

Profit & loss account 4,250
To B’s account 4,250 8,500
88,000 88,000
B’s Account
Particulars Amount Particulars Amount
To C’s account 4,500 By bank account (advance) 70,000
To Joint venture 60,000 By Joint venture 12,000
To Joint venture 23,000 By Joint venture 4,250
By balance c/d (bal. fig) 1,250
87,500 87,500
C’s Account
Particulars Amount Particulars Amount
To Joint venture 5,000 By Joint venture 500

By B’s account (bal. fig) 4,500

5,000 5,000

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Question 6: Jiban and Mitrik decided to work in joint venture with the following scheme, agreeing to share
profits in the ratio of 2/3 and 1/3. They guaranteed the subscription at par of 50 lakhs shares of Rs 10 each in
Rainbow Ltd. and to pay all expenses up to allotment in consideration of Rainbow Ltd. issuing to them 3 lakhs
other shares of Rs 10 each fully paid together with a commission @ 5% in cash which will be taken by Jiban
and Mitrik in 3:2.

Co-ventures introduced cash as follows:

Jiban Stamp charges etc. 1,65,000
Advertising charges 1,35,000
Car expenses 1,54,000
Printing Charges 1,88,000
Mitrik Rent 1,30,000
Solicitors’ charges 80,000

Application fell short of the 50 lakhs shares by 1,20,000 shares and Mitrik introduced Rs 12 lakhs for the
purchase of those shares.

The guarantee having been fulfilled, Rainbow Ltd. handed over to the venturers 3 lakhs shares and also
paid Commission in cash. All their holdings were subsequently sold by the venturer Mitrik receiving
Rs 12,50,000 and Jiban Rs 25 lakhs.

You are required to prepare: Memorandum Joint Venture A/c and Joint Venture A/c with Mitrik in the books
of Jiban. (ICMAI Study material)
Solution: In the books of Jiban
Joint venture with Mitrik account

Particulars Amount Particulars Amount

To, Bank account: (Stamp charges, 6,42,000 By Bank account:(commission) 15,00,000

advertising charges, car expenses and By, Bank account: 25,00,000
printing charges) (Sale proceeds of shares)
To, profit and loss account: (Share of profit) 27,98,667

To, Bank account (Remittance) 5,59,333

40,00,000 40,00,000

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In the books of Mitrik

Joint venture with Mitrik account

Particulars Amount Particulars Amount

To, Bank account: (cost of shares) 12,00,000 By Bank account:(commission) 10,00,000

To bank account: By, Bank account: 12,50,000

Rent 1,30,000 (Sale proceeds of shares)

2,10,000
Solicitor’s charges 80,000

To, profit and loss account: (Share of profit) 13,99,333 By Bank account (Remittance) 5,59,333

28,09,333 28,09,333

Memorandum Joint venture account

Particulars Amount Particulars Amount

To, Mitrik account: By, Jiban account:

Cost of shares 12,00,000 Cash (3/5) 15,00,000
To, Jiban account: By, Mitrik account:
Stamp charges 1,65,000 Cash (2/5) 10,00,000
Advertising charges 1,35,000 By, Jiban account:
Printing charges 1,88,000 Sale proceeds of shares 25,00,000
Car expenses 1,54,000 By, Mitrik account:
To, Mitrik account: Sale proceeds of shares 12,50,000
Rent 1,30,000
Solicitor’s charges 80,000
To, Profit on venture :
Jiban (2/3) 27,98,667
Mitrik (1/3) 13,99,333

62,50,000 62,50,000

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IMPORTANT POINTS TO BE KEPT IN MIND WHILE SOLVING PRACTICAL QUESTIONS: -

• All expenditures (expense/asset) are treated as an expense.

• All receiving’s are treated as income.

• Drawings/ insurance claim received are also treated as income.

• No treatment of goods lost fire fire/theft/normal loss.

• If joint venture is not ended by the end of given time period, then closing stock is required to be
computed at its cost.

• No entry is made for transferring goods from one co-venturer to another.

• Commission/ salary/ interest payable to any co-venturer should also be treated as an expense of the
joint venture.

• If any compensation agreed to be paid by any co-venturer due to his fault/negligence is treated as
income of the joint venture.

• In case of 2nd and 3rd method, advance received in cash/Bills receivable is not treated as
expense/income in joint venture. But discounting charges should be treated as expense in the joint
venture.

Practice question 7: (important for 1 mark question/MCQ)

i. Joint venture is a …………………… jointly taken by two or more persons who share the profits and
losses in an agreed ratio.

ii. When separate sets of books are maintained for a joint venture, goods are taken over by a co-venturer
is credited to………………….
iii. Partners in a joint venture business are called …………….
iv. under Joint venture, liabilities of co-venturers are limited to ……………………...

v. Joint venture is …………… of business organisation.

vi. Joint venture is a temporary partnership without the use of………………….

vii. In joint venture, Profit & losses are shared on the same terms and conditions agreed upon.
However, in the absence of any agreement, profit & share will be divided………..
viii. The terms of the joint ventures are executed on a written agreement signed by……………..
ix. Joint ventures are of short duration. Such associations are ………………………….when the purpose of the
agreement is served.

Answer:
i. short term business undertaking vi. a firm name

ii. Joint venture account vii. equally

iii. co- venturers. viii. all parties involved

iv. a particular assignment ix. temporary and comes to an end

v. a temporary form

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Practice question 8: Multiple choice questions

1. A and B purchased a piece of land for Rs 40,000 and sold it for Rs. 60,000 in 2023. Originally A had
contributed Rs.24,000 and B Rs 16,000. What will be the profit on venture?
(a) Rs 20,000 (b) Rs 16,000 (c) Rs 30,000 (d) Nil

2. A, for joint venture with B, Purchased goods costing Rs 2,00,000. B sold 80% of the goods for Rs. 2,50,000.
Balance of goods were taken over by B at cost less 25%. Find out profit on venture?
(a) Rs 80,000 (b) Rs 90,000 (c) Rs 50,000 (d) None of these

3. If unsold goods costing Rs. 20,000 is taken over by venturer at Rs 15,000. The Joint venture A/c will be credited
by:

(a) Rs 20,000 (b) Rs 15,000 (c) Rs 5,000 (d) Nil

4. A purchased goods costing 42,500. B sold goods of 40,000 at 50,000. Balance goods were taken over by
A at same gross profit percentage as in case of sale. The amount of goods taken over will be.

(a) 3,125 (b) 2,500 (c) 3,000 (d) None

5. Ram and Mohan entered into joint venture where Ram supplies goods worth Rs 60,000 and spend Rs
1,000 on various expenses. Mohan sells the entire lot for Rs 75,000 meeting selling expenses amounted to
Rs 2,000. profit sharing ratio equal. Mohan remits Ram the amount due. The Mohan’s share in profit will
be:

(a) Rs 12,000 (b) Rs 15,000 (c) Rs 6,000 (d) Rs 7,500

6. ‘Ram’ and ‘Mohan’ enter into joint venture where ‘Ram’ supplies goods worth Rs 60,000 and spend Rs
1,000 on various expenses. ‘Mohan’ sells the entire lot for Rs 75,000 meeting selling expenses amounted
to Rs 2,000. profit sharing ratio 3:2. Earlier Mohan has sent an advance of Rs 10,000 to Ram. Mohan
remits Ram the amount due. The amount of remittance will be:

(a) Rs 70,200 (b) Rs 22,000 (c) Rs 60,200 (d) Rs none of above

7. Goods costing Rs. 10,000 destroyed by an accident, insurance claim nil:

(a) Rs. 10,000 will be credited to joint venture account

(b) No entry will be made in the books of joint venture
(c) Rs. 10,000 will be debited in Joint venture account as loss
(d) Rs. 8,000 will be credited in joint venture account

8. If A co-venturer takes away goods under memorandum joint venture method then he will debit these
goods in his books to:
(a) Joint venture account (b) Personal account of co-venturer
(c) Purchases account (d) Sales account

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9. For opening joint bank account, in case of separate sets of books:

(a) Joint Venture a/c will be debited and venturer A/c will be credited
(b) Joint Bank A/c is debited and venturer’s capital A/c is credited
(c) Joint venture A/c is debited and joint Bank A/c will be credited
(d) Joint Bank A/c will be debited and joint venture A/c will be credited

10. State which of the following statements is true?

(a) Memorandum joint venture account is prepared to find out profit on venture.
(b) Memorandum joint venture account is prepared to find out amount due from co-venture
(c) Memorandum joint venture account is prepared when separate sets of books is maintained
(d) In memorandum joint venture account only one venture's transactions are recorded.

11. In case of purchase of furniture in joint venture through joint bank A/c, while separate set of books is
maintained.Which of the following is the correct entry?
(a) Debit furniture, credit joint bank A/c
(b) Debit furniture, credit joint venture A/c
(c) Debit Joint venture, credit joint bank A/c
(d) Debit Joint venture A/c, Credit furniture A/c

12. For material supplied from own stock by any of the venturer, the correct journal entry will be: (In case of
separate sets of books)

(a) Joint Venture A/c will be debited and Venturer’s Capital A/c will be credited

(b) Joint Venture A/c will be debited and Joint Bank A/c will be credited
(c) Joint Venture A/c will be debited and Material A/c will be credited
(d) Joint Bank A/c will be debited and Joint Venture A/c will be credited

13. A and B entered into a joint venture to underwrite the shares of K Ltd. K Ltd make an equity issue of 1,00,000 equity
shares of Rs 10 each. 80% of the issue are subscribed by the public. The profit sharing ratio between A and B is 3:2. The
balance shares not subscribed by the public, purchased by A and B in profit sharing ratio. How many shares to be
purchased by A.

(a) 80,000 shares (b) 72,000 shares (c) 12,000 shares (d)
8,000 shares

14. P and Q entered into a Joint Venture sharing profits and losses in the ratio 3:2. P purchased goods costing
Rs 2,00,000. Other expenses of P Rs 10,000. Q sold the goods for 1,80,000. Remaining goods were taken over by Q
at Rs 20,000. The amount of final remittance to be paid by Q to P will be:

(a) 215000 (b)20,000 (c) 210000 (d)2,04,000

15. C and D entered into a Joint Venture to construct a bridge. They did not open separate set of books. They
shared profits and losses as 3:2. C contributed Rs 1,50,000 for purchase of materials. D paid wages amounting
to Rs 80,000. Other expenses were paid as: C – 5,000; D – 15,000

C purchased one machine for Rs 20,000. The machine was taken over by C for Rs 10,000. Total contract value of
Rs 3,00,000 was received by D. What will be the profit on venture?
(a) Rs. 30,000 (b) Rs. 40,000 (c) Rs. 20,000 (d) Rs. 15,000

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16. A bought goods of the value of Rs 10,000 and consigned them to B to be sold by them on a joint venture, profits
being divided equally, A paid Rs 1,000 for freight and insurance. A draws a bill on B for Rs 10,000. A got it
discounted at Rs 9,500. B sold the goods for Rs 15,000. Commission payable to B Rs 500. The amount to be remitted
by B to A will be:

(a) 12,500 (b) 3,000 (c) 14,500 (d) 13,500

17. A purchased goods costing 1,00,000. B sold the goods for Rs 1,50,000. Profit sharing ratio between A and B
equal. If same sets of books are maintained, what will be the final remittance?

(a) B will remit Rs 1,25,000 to A (b) B will remit Rs 1,50,000 to A

(c) A will remit Rs 1,00,000 to B (d) B will remit Rs 25,000 to A

18. A, B and C are co-venturer. The relative Profit sharing ratio between A and B is 3:2 and between B and C is
also 3:2. Fine out the PSR between A, B and C.

(a) 3:2:2 (b)9:6:4 (c) 4:3:2 (d) 3:2:1

19. Shyam and Ramya are entered in the business of buy and sale of food grain for a period of one year and

sharing the profit in the ratio of 2 :4 , this agreement is a:

(a) Partnership
(b) Consignment
(c) Joint-venture
(d) Lease
Answer :

1-a 2-a 3-b 4-a 5-c 6-c 7-b 8-b 9-b 10-a

11-c 12-a 13-c 14-d 15-b 16-b 17-d 18-b 19-c

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